(copyright ASRC tm 2002)
EDITORIAL NOTE: From June through December 2002, Arctic Slope Regional Corp. ran a series of five articles in its shareholder newsletter regarding the corporate governance of the corporation. With permission from ASRC, the series is being reprinted in the CIRI Shareholder Update to share with CIRI shareholders how these same laws affect our corporation, shareholders, directors, and management. Each article will appear in its entirety over the next few months.

This is the third article in a series that discusses the various roles the law requires shareholders, directors and management to play in making decisions about how a corporation like ASRC is run. The first two articles talked about the role of shareholders and directors. This article tells you about the role of management.

The law gives corporate shareholders two main rights (a) to decide who will serve on the corporation’s Board of Directors, and (b) to receive dividends when the corporation makes a profit. The law gives directors the right and duty to oversee the business affairs of the corporation and to make decisions on basic corporate policy. The directors also approve most major business decisions and must be well informed about the risks and benefits their decisions will have on the corporation. But directors and shareholders cannot become involved in the day-to-day decision-making needed to actually run the corporation. So long as shareholders and directors stick to their proper roles, the law will protect them from having to pay the debts of the corporation out of their own pockets. This protection is known as the “corporate veil.”

The law gives management the right and duty to make all of the decisions needed to actually run the business of the corporation on a day to day basis. The Chief Executive Officer (CEO) puts together a team of people with the education and experience to help him run the corporation. At ASRC the CEO’s senior management team includes the following members: a Chief Operations Officer (COO), a Chief Financial Officer (CFO), Vice Presidents of Government Affairs, Administration & Shareholder Relations, Operations, Lands & Resources, Human Resources, General Counsel (the corporation’s in-house attorney), a Corporate Treasurer and a Corporate Secretary.

It is the responsibility of the CEO, and of senior management under the CEO’s direction, to operate the corporation in an honest, law abiding, and profitable manner. Management must understand every part of the corporation’s business and how it earns money. Management prepares the strategic and operating plans for the corporation that will be approved by the directors. Management also prepares detailed operating budgets to cover the cost of doing business that will be reviewed by the directors. After the directors approve these plans and budgets, management is responsible for carrying them out.
Management hires mid-level management and the employees needed to operate the corporation under the approved plans and budgets. Management also makes recommendations to the directors on when to buy businesses that will become profitable subsidiary companies, and when to sell subsidiary companies that aren’t making a profit. Management is also responsible for recognizing and avoiding business risks that could cause the corporation to lose money, violate the law, or create bad publicity.

Making decisions about the corporation’s money is one of management’s biggest responsibilities. The CEO works with the COO and CFO to make sure the corporation has a good system of internal controls and financial reporting. The internal controls prevent loss by making sure that money is spent carefully, for real business purposes and money due the corporation is timely collected. Financial reporting is how the various departments and subsidiaries tell management about their use of corporate money, property and resources. Good financial reporting is important so that management and the directors can make informed business decisions, and so the annual report correctly states how the corporation is generating wealth for the shareholders.

Like directors, members of management have a duty of loyalty to make business decisions in the best interest of ASRC and to use corporate property only for business purposes. Management must avoid “conflicts of interest” and protect the confidential nature of ASRC’s internal information. Finally, management must make sure that directors, officers, and employees are educated about the business of the corporation and how to operate the corporation ethically and in compliance with the law. One of the ways management carries out this responsibility is by recommending codes of conduct, such as the Integrity Strategy adopted by the ASRC Board of Directors last February. Once adopted, management sets the example for everyone who works for the corporation by showing them how to live by the code as the corporation does business.
Running the day-to-day business affairs of a corporation as large and complex as ASRC is more than a full-time job. ASRC’s track record of continuing success is largely due to the consistent leadership, strong Inupiat cultural values and hard work of its management team.